There are a number of different options available to help you manage and maintain monies that have been accumulated in an employer’s pension fund. There are basically three types of locked-in retirement plans:
- Locked-In Retirement Account (LIRA)
- Locked-In Retirement Income Fund (LRIF)
- Life Income Fund (LIF)
Locked-In Retirement Account (LIRA): A LIRA is a special type of retirement savings plan that locks-in the money an investor receives from pension plans. Basically, LIRAs are designed to accumulate retirement savings. A Locked-In Retirement Account is somewhat similar to an RRSP; both help investors save for retirement by deferring the tax payable on the investments held in the plans. What makes a LIRA different from an RRSP is that the money in it is locked-in. In general, the funds in a LIRA may only be withdrawn to purchase forms of retirement income (such as LIFs, LRIFs, and Life Annuities), or if an individual is experiencing financial or health-related hardships.
Locked-In Retirement Income Fund (LRIF): A Locked-in Retirement Income Fund (LRIF) is a retirement vehicle that holds locked-in pension monies. Essentially a LRIF is a RRIF with a locked-in provision, which means that withdrawals are limited by pension withdrawal rules. LRIFs are currently available in some provinces including Ontario. The LRIF is intended to provide the investor with a life income stream that must be withdrawn as income each year (except for the first year of the plan). The investor determines the amount of income to be withdrawn each year, subject to certain minimum and maximum withdrawal rules. An LRIF does not have a maturity date. Due to the locked-in provision of LRIFs they are protected from seizure from creditors, although some jurisdictions permit pensions to be garnished for unpaid support payments. LRIFs cannot be transferred to RRIFs (unless due to death of the LRIF investor or the funds are unlocked) and can only be opened through the transfer of funds from a Locked-in Retirement Account (LIRA), a Registered Pension Plan (RPP), a Locked-in Income Fund (LIF) (under Alberta, Ontario, or Manitoba jurisdiction) or from an existing LRIF account.
Life Income Fund (LIF): A Locked-in Income Fund is a retirement income vehicle that holds locked-in pension monies (a RRIF with a locked-in provision – which means withdrawals are limited by pension withdrawal rules). LIFs are administered provincially except for individuals employed in certain industries, which fall under federal jurisdiction.
